Wells Fargo has lowered its price target for Alphabet (NASDAQ: GOOGL) stock, citing mounting pressure on Google’s search advertising business from the expansion of AI Overviews.
In a November 2 research note, Wells Fargo analyst Ken Gawrelski reduced the price target to $365 from $371, representing a 1.62% cut.
However, the analyst maintained an ‘Overweight’ rating, indicating continued confidence in the technology giant despite near-term challenges.
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The revised target implies approximately 30% upside from Alphabet’s share price of $279 at press time.
Why Wells Fargo cut Google stock price
Wells Fargo attributed the slowdown in search revenue primarily to Google’s transition toward AI-powered search experiences rather than weaker user engagement, macroeconomic conditions, or click monetization issues.
Indeed, the firm estimates that AI Overviews now appear in approximately 82% of global search queries, following an increase of about seven percentage points in October.
Meanwhile, Google Search and Gemini sessions grew 36% year over year in the third quarter of 2026, marking their fastest growth in several years.
However, rising search activity has not translated into more paid clicks, raising concerns about AI Overviews’ impact on Google’s search monetization.
Wells Fargo expects the pressure to persist for two more quarters, with search revenue growth slowing to 9% in Q4 2026 and 4% in Q1 2027 before recovering to 6% in Q2 2027.
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The analyst also found a -0.97 correlation between paid clicks per search session and U.S. desktop AI Overviews penetration from Q2 2024 to Q3 2026.
The concerns come as Alphabet faces growing scrutiny over the financial implications of its AI investments, despite continued expansion in other business segments.
In its third-quarter 2026 results, Google Cloud revenue surged 103% year over year to approximately $30.7 billion, while total Alphabet revenue increased 25% to $127.6 billion.
However, Search and other advertising revenue grew 12%, highlighting the divergence between its cloud business and core search operations.
Wall Street bullish on Google stock
Despite Wells Fargo’s reduced price target, the broader analyst outlook on Alphabet remains positive.
Data from TipRanks shows that 33 Wall Street analysts cover the stock, with 29 issuing ‘Buy’ recommendations and four maintaining ‘Hold’ ratings. None recommend selling the shares.
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The average 12-month price target stands at $400.47, implying approximately 43.11% upside from the current price. The highest forecast is $490, while the lowest stands at $300.
This suggests that analysts continue to see considerable upside potential, even as Google’s AI transition creates uncertainty around its traditional search advertising model.
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